When your next raise kicks in, you may find yourself dreaming of all the things you could buy with that cash bump. You might want to consider using that extra money to redecorate your home. You may even think about an entirely new apartment that’s now in your budget. But does a raise mean you should upgrade your apartment?

## First, calculate the maximum rent you can afford

Financial experts have established guidelines on how much of your income you should reserve for paying rent. The general consensus is that a person should spend at most 30 percent of their monthly salary on rent.

Let’s say your yearly salary is \$60,000. This translates to a monthly salary of \$5,000, and 30 percent of \$5,000 is \$1,500. Thus, for this salary, the most you’ll want to pay in rent is \$1,500.

Now let’s say you get a raise to \$63,000. Your monthly salary thus increases to \$5,250, and 30 percent of \$5,250 is \$1,575. Thus, if you’re currently living in a home for which you’re paying \$1,400 in rent, but if a home you’d once considered rents at \$1,550 — which was above your pre-raise 30 percent cap — you could consider moving into this dream home with your raise.

Despite the prevalence of the 30 percent model, some financial experts advise different systems for determining the rent one can afford. For example, in the 50/30/20 model, 50 percent of a person’s income can be used for paying rent, utilities, transportation, groceries, and other monthly costs that vary minimally by month. Another 30 percent would be disposable income used for non-essential goods, and the final 20 percent would be saved and used to pay debts. This is especially helpful for those who live in cities with a high cost of living.

However, like this math shows, the standard four to five percent annual salary raise often doesn’t dramatically alter your maximum affordable rent. Considering using your small extra bit of housing income in other ways instead, such as placing it in a savings account or paying down debt.

## Is rent the best way to put your raise to work?

In the above example, your monthly rent cap increases by \$75. This means that your yearly rent cap increases by \$900. Instead of going through the hassle of moving, which can quickly eat away at this extra \$900, make the home into which you’ve already settled more comfortable. It can take far less money than \$900 to redecorate your home, upgrade your furniture, and generally renovate (just be sure that your landlord receives a notification when needed).

A raise doesn’t have to equate to more spending. If you’re satisfied with your life at the level you’re currently spending, consider saving instead. Keeping your rent modest is a great way to save money for retirement. Even if you’re only able to small amounts of money now, that can quickly add up and turn into your own little nest egg, which can be invested into your dream apartment later on.